States Take Diverging Approaches to Renewable Portfolio Standards

Apr.18.2017

Since last November’s election, much attention has been focused on impending changes to federal energy policy. If President Trump’s budget is any guide, the administration is looking to curtail investment in programs that promote clean tech, such as the Department of Energy’s SunShot Initiative (an Obama administration program to drive down the cost of solar electricity and support solar adoption), and to promote investment in more traditional sources of energy.1

Many of the initiatives to promote the development of renewable energy in fact have always been at the state level. Twenty-nine states and the District of Columbia have renewable portfolio standards (RPSs) requiring utilities to procure a certain percentage of their electricity from renewable sources. The mechanics of each program and the penalties for failing to meet the regulatory mandates vary, but utilities typically have three means of satisfying a RPS: (1) purchase or generate renewable energy; (2) purchase renewable energy credits (RECs), which are tradable proxies for renewable energy; or (3) pay a monetary fee for any shortfall (known in some states as an alternative compliance payment).

Legislators or regulators in several states have recently passed or introduced measures to raise the percentage of energy that must be procured from renewables. In February, Maryland enacted legislation over the Governor’s veto that increases the state’s RPS from 20 percent by 2022 to 25 percent by 2020, while California and Massachusetts are both considering legislation that would make them the second and third states (after Hawaii) to have an RPS of 100 percent. Nevada, which has seen the cost of solar generation decrease 76 percent since 2009, is considering legislation that would increase its RPS from 25 percent by 2025 to 80 percent by 2040. And other states, such as Connecticut and Minnesota, are also debating whether to increase their standards.

Other states, however, are going in the opposite direction. The majority of states in the Southeast do not have an RPS, and at least six other states are considering lowering existing standards or eliminating them altogether. For example, in March of this year, the Ohio House of Representatives, challenging a gubernatorial veto of an earlier bill, passed legislation that would first make the RPS voluntary, and then eliminate it in 2026. News reports suggest the Governor will again veto the attempt to roll back the state’s RPS should it pass the State Senate, and that proponents will not have enough votes to overcome the veto. Legislators in New Hampshire are also debating whether to eliminate its RPS, which became a high profile issue when firearms manufacturer Sig Sauer cited New Hampshire’s high electricity prices as the reason it is moving production to Arkansas.

While adoption of renewable portfolio standards has long been considered more politically palatable than alternative forms of renewable energy support, such as a carbon tax, the divergent strategies in California and Ohio suggest it has become more of a partisan issue. It remains to be seen whether efforts to undermine RPSs will be successful, but it appears that much of the innovation and promotion of renewable energy will continue to occur in the West and the Northeast, which have been consistent leaders in this space.